Buying a freight forwarder in Canada

Someone evaluating a freight forwarder is buying a working network: carriers, clients, staff who know both, and a way of getting goods across borders. Ask whether the margin comes from a spread of clients and trade lanes, and whether the seller can show that the work continues when the owner is not on the phone. The harder question for a first-time buyer is whether you can run it from day one. Start with your own position, then test the seller’s story. For a wider checklist, see what to check before buying a business.

What you may have to hold yourself

Do not assume the business’s standing becomes yours at closing. Ask the seller to name every accreditation, registration or authorization the business operates under and who personally holds each one. Then ask the body that issues it what a change of ownership or control requires, and whether you or a named employee must qualify. The same goes for any customs function. CBSA’s importing guide lists the steps an importer works through: registering in its CARM system, finding the tariff classification and value for duty, making a declaration to have goods released, and paying duties and taxes. Confirm whose accounts those tasks run under now, and whose they will run under afterwards.

What the seller may not volunteer

Ask for margin, not billings, by client. Ask how many carrier or airline rates were negotiated personally by the owner, and whether any carrier can reprice when ownership changes. Ask what claims have been made for loss, damage or errors on declarations, how each ended, and whether any are still open. Ask for CBSA correspondence about adjustments, since the importing guide notes that importers can make corrections or be notified when CBSA makes adjustments. Ask what happens to the biggest client if one named account manager leaves. Ask whether key clients buy under written terms or only by habit, and whether the seller’s other businesses trade with the forwarder at prices a stranger would not get.

Client data comes with duties

You will see client names and contact details long before you own anything. Section 7.2 of PIPEDA allows organizations that are parties to a prospective business transaction to use and disclose personal information without the individual’s knowledge or consent, in addition to the exceptions already in the Act, when conditions are met. Those include an agreement requiring the organization that receives it to use it solely for purposes related to the transaction, to protect it with safeguards appropriate to its sensitivity, and to return or destroy it within a reasonable time if the deal does not proceed. Section 7.2(3) says an organization shall comply with the terms of any such agreement it enters, so as the receiving buyer keep the information to the people who need it, log who has seen it and be ready to return or destroy it if you walk away.

Competition review and your buyer profile

The Competition Bureau says the Commissioner may review any merger or acquisition regardless of size, and that notification depends on thresholds tied to the size of the parties and the transaction. The Bureau adds that the thresholds, other criteria and certain exceptions to notification are set out in the Competition Act, so ask counsel early, especially if the buyer is a forwarder or logistics group. Your profile also changes your risks. BDC describes its business purchase loan as intended for an existing business with revenue and an established client base, so ask any lender how it views a forwarder whose clients are tied to the seller.

Before you make an offer

Work out how you will pay before you fall for a business. BDC says a financing structure may combine your own investment, a business loan and seller financing, that you and the seller must agree a purchase price before you apply, and that the process should begin early to avoid delays. Talk to a lender about a forwarder’s particular shape: much of the price may sit in goodwill and client files. The guide to financing a freight forwarder acquisition covers the questions to ask.

Test the people, not just the numbers

If the seller agrees, meet the staff who hold the carrier and client relationships before you commit. Ask how long each has worked there, who answers when a shipment goes wrong, and whether anyone has signed confidentiality or non-solicitation terms. Ask the seller what each key person has been told about the sale. A forwarder whose relationships sit with several people is a different purchase from one where a single name holds the accounts, and you want to know which you are buying before price is settled.

• A list of every accreditation, registration and authorization, with who holds it and what a change of ownership requires.
• Margin by client and lane, plus the carrier and airline agreements and their change-of-ownership terms.
• Claims history and any open files, with how each was settled.
• The customs arrangement: who performs it, under whose accounts, and whether it transfers.
• A handover plan naming who introduces you to each key client and carrier, and for how long.